Relief To Knight Riders Sports: Change Of Opinion Does Not Constitute Justification To Believe That Income Chargeable To Tax Has Escaped Assessment, Bombay High Court

Knight Riders Sports Pvt. Ltd. V/s Assistant Commissioner of Income Tax [Writ Petition No.2269 Of 2023]

In a major relief to Knight Riders Sports, the Bombay High Court has held that change of opinion does not constitute justification to believe that income chargeable to tax has escaped assessment.

The bench of Justice K. R. Shriram and Justice Kamal Khata has observed that the reopening of the assessment by the impugned notice is merely on the basis of change of opinion from that held earlier during the course of assessment proceedings that led to the passing of the assessment order dated 25th December 2018.

The petitioner/assessee has challenged a notice under Section 148A(b) of the Income Tax Act, 1961, the order passed under Section 148A(d) of the Act and the reassessment notice dated 30th March 2023 issued under Section 148 of the Income Tax Act.

The petitioner, for the year under consideration, i.e. Assessment Year 2016-2017, carried on the business of operating and running a team in the Indian Premier League, i.e., Kolkata Knight Riders. Petitioner filed return of income on 13th October 2016 declaring total income of Rs.11,17,62,590.

During the years Petitioner paid a sum of Rs.3,04,85,970 as management fees towards consultancy and team management fees. A sum of Rs. 1.90 crores was paid as consultancy fees to one Insignia Sports International Ltd.

During the course of assessment proceedings, Petitioner received various notices under Section 142(1). In the notice under Section 142(1) of the Act petitioner was called upon to furnish in writing and verify in the prescribed manner information to justify the outward remittances to any non-resident (not being a company) or to a foreign company and in that regard also submit relevant 15CA and 15CB certificate.

The petitioner replied through its Chartered Accountant’s letter dated 29th January 2018 in which Petitioner provided details of the expenses that were incurred to non residents/foreign companies. As regard Form 15CA and Form 15CB Petitioner stated that since the data were voluminous it would help if a specific list of expenses in respect of which the two forms are required is made available.

The court held that there is a change of opinion because once a query has been raised during the assessment and query has been answered and accepted by the AO while passing the assessment order, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It would apply even if the assessment order has not specifically dealt with that issue.